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Kate Hudson's Fabletics profits off the athleisure craze

Just a few years ago, it was almost unheard of to wear sneakers, yoga pants or stretchy T-shirts in the workplace. That’s all changed, though. These days, people sport so-called athleisure wear in casual workplaces all the time.

The rise of athleisure is bucking the downward trend in retail and changing the landscape of the industry. Americans spent nearly $44 billion on active wear in 2015, up 16% from the previous year. In fact, the category has become so popular that the term “athleisure” has been added to the Merriam-Webster Dictionary.

And the category’s rapid growth has piqued the interest of high-end and low-end retailers nationwide. Big, well-established names like Gap (GPS), Tory Burch, Lululemon (LULU) and H&M are looking to cash in on the athleisure craze, as are relatively new brands like Fabletics and IVY PARK.

Adam Goldenberg of Fabletics, an active-wear line co-founded by actress Kate Hudson, told Yahoo Finance’s Seana Smith in the video above that the movement to be more comfortable, while still looking fashionable, is what’s driving sales in the category.

And Hudson’s active-wear brand is off to a fast start. In less than three years, the company is already profitable with over a million subscribers to its VIP membership program. Goldenberg says two things help Fabletics stand out in a very crowded casual attire space: style and cost.

“Our prints are very unique and women love it,” Goldenberg said. “Second is value for price. We’re delivering, in our view, Lululemon quality for a third or half of the price, and that’s a very unique value prop and we have not seen any other brands do this.”

Fabletics, which was originally founded as an e-commerce operation, is looking to expand its brick-and-mortar presence. The company has nine retail locations across the US with plans to open another dozen before the end of the year.

“How we’re doing retail is very different. We sold over 10 million items and got to 50% national brand awareness before we ever opened our first store. We have focused on e-commerce first, and building our brand online,” Goldberg said. “If we don’t open up retail stores, we’re leaving out 50% of the market. We feel very strongly that Fabletics is a great competitor to Lululemon and Athleta which have very strong retail presences.”